Penalty u/s 271(1)(C) - Search u/s 132
An assessee, regularly assessed to income tax, was subjected to search u/s 132 in August, 2005. On the date of search, return had been filed upto A.Y 2005-06 and it was pending for A.Y 2006-07. Certain bank accounts were unearthed, wherein the assessee had credited certain income. These income were neither reflected in his books, nor disclosed in the return of the relevant years filed so far.
He filed returns in response notice served u /s 153A(a) for the six years upto A.Y 2005-06, offering these income in the relevant years fully and correctly and paying tax thereon. Assessment u/ s 153A(b) was completed thereto, wherein the income was accepted without any addition.
Though he had offered these income in full, there was no question asked at the time of search with reference to these credits in bank a/cs and so the assessee also did not mention in the sworn statement that he will be offering these income in the return. But for the absence of any such recording in the sworn statement taken u /s 132(4), the assessee came out clean, declaring these income fully in the return.
The A.O has now issued penalty notice u /s 271(1)(C). The assessee pleaded for dropping penal proceedings, since he has declared income fully in the return. A.O contends that there was no voluntary statement by the assessee to offer these income as recorded in the sworn statement u/s 132(4), nor did the assessee make any specific disclosure, at the time of search, which alone would entitle him to take shelter under the exception clauses of Expln. 5 to Section 271and hence the immunity as envisaged in Expln. 5 would be lost to the assessee.
Please enlighten
1) Whether voluntary offer of such income in full in the return would not tantamount to disclosure by the assessee as envisaged in Expl. 5?
2) Whether some kind of recording in the sworn statement is a must to get immunity under Expln. 5?
3) Whether following cases would come to his help?
(a) CIT vs S.D.V Chandru [(2004) 206 ITR 175 (Mad)]
(b) Sudarshan silks and sarees [(2008) 300 ITR 205 (SC)]
You may also please quote other relevant case laws which the assessee can rely, or other ground that he may put forth before the A.O.
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